How Do I Figure an Amortization for a Line of Credit?

Amortization involves paying off a loan with steady payments over a set period of time. Lines of credit are sometimes open-ended products with no set term times. Additionally, the balances on lines of credit fluctuate with usage and most have variable interest rates based on prime rate. You cannot create an amortization schedule for a loan with a variable balance, interest rate or term. If you have a line of credit with a fixed rate or you can fix a portion of your line balance at a certain rate for a particular period of time, then you can create an amortization schedule.

• 1

  Find your most recent line of credit statement. Call the customer service number listed on the statement and ask a representative for your current balance. The latest balance includes charges that occurred after your statement printing date and monthly interest charges. Ask the representative for your interest rate.

• 2

  Go online and perform a search for amortization calculators. Most financial websites such as bankrate.com, dinkytown.net and hsh.com have free amortization calculators (see Resources). Generally, amortization calculators are designed for mortgage calculations but you can enter data for any type of loan if you have a term, interest rate and principal balance.

• 3

  Enter the balance you owe in the "amount" section. Enter the interest rate and length of loan as either months or years. If you have a fixed rate on your line of credit, but not a fixed term, you can choose your own term by entering various numbers of years into the "term" section. Try several different terms until you find one with an affordable payment. Most amortization calculators allow you to print off a full amortization chart that details principal and interest payments. At the beginning, the majority of the payment covers interest but as time passes a higher percentage of each payment goes to principal until the last few payments, which are principal only.